New construction makes a comeback in tight housing market

A new house in the Owl Ridge subdivision in west Greeley is one of many areas that continue to see growth. It may be a tough market for buyers coming into this summer's buying season, having to compete with multiple offers and bidding wars. New construction has become more competitive as a result.

Homes in the WestRidge subdivision near University School are selling quickly, keeping local builders very busy this spring. Inventory is still very low, but builders are bringing homes out of the ground quickly.

The local housing market has tightened up so much in the last year, sellers frequently are faced with bidding wars and being under contract within days — sometimes within hours — of putting them on the market. It’s a good situation for sellers, not so much for buyers.

As of last week, there were only 459 active homes on the market, but only about 216 of which were truly available and not under contract in the Greeley/Evans market, Springfield said. A normal inventory would be 900 to 1,100 homes.

“One of the solutions is new construction,” Springfield said. Of that 459, she said, about 116 were new construction, or about a fourth of the inventory.

“If we didn’t have new construction, a quarter of our market would be gone,” Springfield said. “That is significant that one in four houses is new construction, which wasn’t the case three years ago.”

New construction, being built on previously “distressed” properties, which builders snapped up at firesale prices during the recession, is making noise throughout Greeley, east to west, as buyers begin to turn away from the increasingly difficult resale market.

“We haven’t had a home that we’ve built get all the way done without being sold,” said Jammie Sabin, co-owner of Aspen Homes, which is building in Pumpkin Ridge and WestRidge in west Greeley. “It’s a 180-degree turn — not anything like it was in the last five years.

“All the markets seem strong, but I think the Greeley market in terms of standing inventory is probably the tightest/strongest market,” he said.

The bidding wars on resale are making new construction more competitive, Springfield and builders say. The median home sale price in the Greeley’s Evans market is higher than it’s ever been at $184,000 at the end of March. That’s a 12 percent increase from last year at the same time, and a 7.3 percent increase from January.

“This may be one of the last opportunities to buy new and have it be somewhat similar to resale,” Springfield said. “Land and water prices are going to go up drastically. What’s being built new are what was absorbed from the distressed land. Builders got the land for pennies on the dollar, so they didn’t have to pass on an increase in tap fees.”

Greeley-based Baessler Homes, which is building throughout Weld County, put up 86 homes last year and owners hope to surpass that this year. In 2012, the builder only put up 54 homes.

“We’re certainly busy and that’s been a tremendous blessing,” said Jamie Baessler, president of Baessler Homes. “But I think the fact that there is very little supply is certainly driving people to other options.

“I think people are certainly coming to us looking for the new home, because they can at least be guaranteed they’re going to find a home. They’re not going to get into a bidding war. The only guarantee to get the home you want is to just build it.”

Though a bit more narrow today, the pricing gap between new and resale will widen. Baessler said because the economy is coming back, people are opting for bigger homes with more options, which are bringing up the sales numbers.

Any new homes that go up on new land, will have to absorb those higher land and water prices.

“Our average sales price is up almost $50,000 per home,” Baessler said. “It boils down to land costs, water. A share of raw water has quadrupled in two and half years.”

The city of Greeley hasn’t gotten close yet to the residential numbers seen pre-recession (the city recorded a high of 702 single-family home permits in 2004), but the numbers are climbing. This year, the city expects 271 single-family homes to be permitted, a sharp rise from 155 permitted in 2013. The city has 656 available lots ready to build that already have been approved.